BWC Board of Directors...3/11/2011 11:24 AM BWC Board of Directors Board Agenda Thursday, March 24,...

3/11/2011 11:24 AM

BWC Board of Directors

Board Agenda Thursday, March 24, 2011

William Green Building Level 2, Room 3

8:15 a.m. – 8:30 a.m.

Call to Order

Nicholas Zuk, Board Chair

Roll Call

Jill Whitworth, Scribe


Approval of minutes of the February 24, 2011 Board meeting

Committee Reports Governance Committee

Larry Price, Committee Vice-Chair

Chair Recommendations for Committee Assignments Nicholas Zuk, Board Chair

Adjourn


Next Meeting: Friday, March 25, 2011 * Unless previous meeting adjourns earlier

* * Not all agenda items have material.

* * * Agenda subject to change

3/11/2011 2:06 PM

BWC Board of Directors

Board Agenda Friday, March 25, 2011

William Green Building Level 2, Room 3

8:00 a.m. – 10:00 a.m.

Call to Order


Roll Call

Larry Rhodebeck, Scribe

Board Chair

Approval of minutes of the March 24, 2011 Board meeting

Review meeting agenda

Committee Reports Actuarial Committee

Steve Lehecka, Committee Chair

1. NCCI Classification Code changes, Rule 4123-17-04

2. PA Deductible Program, Rule 4123-17-72

Audit Committee

Ken Haffey, Committee Chair

1. Electronic Submission of Documents Rule 4125-1-02

Investment Committee Bob Smith, Committee Chair

1. Approve recommendation for Full Service Investment Consultant

2. Approve renewal of BWC transition manager optional use

contracts

3. IPS revisions regarding long duration credit active management

Medical Services and Safety Committee

James Hummel, Committee Vice-Chair

1. Claimant Reimbursement Rule 4123-6-26

Monthly Enterprise Report

Tracy Valentino, Chief, Fiscal & Planning Division

3/11/2011 2:06 PM

Administrator’s Report

Steve Buehrer, Administrator

Adjourn

Board Chair

Next Meeting: Friday, April 29, 2011 * Unless previous meeting adjourns earlier

* * Not all agenda items have material.

* * * Agenda subject to change

Enterprise ReportMarch 2011

2 BWC Enterprise Report

Enterprise Report

BWC’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The statements are prepared using the accrual basis of accounting and the economic resources measurement focus.

Statement of OperationsThis statement reports operating revenues and expenses, as well as net investment revenues for the current fiscal year to date, projected, and prior fiscal year to date. A combining schedule for the statement of opera-tions presents the current fiscal year to date revenue and expenses by fund. Pages 5 and 6.

Statement of Investment IncomeThis statement provides information on the sources of investment income, changes in investment fair value, and investment expenses. Information is presented for the current fiscal year to date, projected, and prior fiscal year to date. Page 7.

Administrative Cost Fund Budget SummaryThis statement reports actual fiscal year to date administrative expenses and budget compared to the budget for the fiscal year and prior fiscal year to date expenses for BWC. The fiscal year budget is also compared to the agency appropriation. Pages 8 and 9.

State Insurance Fund Administrative Expense SummaryThis statement reports administrative expenses that are permitted to be paid from the State Insurance Fund for the current and prior fiscal year to date along with the remaining open encumbrances for each of the contracts. Page 10.

Operating TransfersThis statement reports operating transfers that fund programs administered by other governmental entities as permit-ted or required by the Ohio Revised Code. Page 10.

Statement of Cash FlowsThis statement presents cash flows from operating, capital and related financing activities, and investing ac-tivities. Cash collections and payments are reflected in this statement to arrive at the net increase or decrease in cash and cash equivalents. Page 11.

Statement of Net AssetsThis statement presents information reflecting BWC’s assets, liabilities, and net assets. Net assets represent the amount of total assets less liabilities. This statement would be referred to as a balance sheet in the private sector. A combining schedule presents this information by fund. Pages 12 and 13.

Financial Performance MetricsFinancial ratios reflecting BWC’s performance are presented here. These financial ratios are insurance indus-try recognized financial metrics. Page 14.

Operational Performance MetricsMeasures reflecting BWC’s operational performance are presented here. Pages 15 through 18.

BWC Enterprise Report 3

February Financial AnalysisBWC’s net assets increased by $310 million in February resulting in net assets of $5.3 billion at February 28, 2011 com-pared to $5.0 billion at January 31, 2011.

o Premium and assessment income net of the provision for uncollectible accounts receivable and ceded reinsur-ance premiums resulted in operating revenues of $147 million in February. The accrual of ceded reinsurance premiums is netted against earned premiums in the Statement of Operations.

o Benefits and compensation adjustment expenses of $190 million along with other expenses of $9 million resulted in operating expenses of $199 million.

o A decrease of $6 million in medical benefits along with a $2.6 million decline in settlements contributed to de-creased net benefit payments in February. Medical payments of $61.5 million issued in February are the third lowest monthly total issued in the last 24 months. The previous monthly lows for medical payments were January 2010 and February 2010 with $60.2 million and $60.7 million, respectively. February payments include $5 million in quarterly performance payments made to managed care organizations.

o A $305 million increase in the fair value of the investment portfolio in February along with interest and dividend income of $58 million for the month, resulted in net investment income of $362 million for the month after invest-ment expenses of $0.7 million. The increase in the fair value of the portfolio is comprised of $0.6 million in net realized gains and $304 million in net unrealized gains.

o Cash and cash equivalents include $162 million in money market holdings in the outside investment manager accounts. These funds are committed to covering a $105 million net investment trade payable for transactions that will settle in March.

o Premium and assessment receipts of $501 million were collected in February compared to $460 million in Febru-ary 2010 when the last day of the month was Sunday. Approximately 212,000 or 85% of private employers timely filed their payroll report for the July through December 2010 policy period compared to 84% for the same period last year.

Operating Revenues $147 $150 $171Operating Expenses (199) (203) (185)Operating Transfers – (1) –Net Operating Gain (Loss) (52) (54) (14)Net Investment Income (Loss) 362 45 119Increase (Decrease) in Net Assets 310 (9) 105

Net Assets End of Period $5,321 $5,011 $4,010

Month Ended Month Ended Month Ended($ in millions) Feb. 28, 2011 Jan. 31, 2011 Feb. 28, 2010

Change in Reserves $22 $22 $ –Net Benefit Payments 136 146 (10)Payments for Comp Adjust Expenses 15 14 1MCO Admin Payments 17 12 5Other expenses 9 9 –

$199 $203 $(4)

Month Ended Month Ended Increase($ in millions) Feb. 28, 2011 Jan. 31, 2011 (Decrease)


$4.0 $4.3

$4.6

$3.8 $3.8

$4.4 $4.5

$4.9 $5.1

$4.8 $5.0 $5.0

$5.3

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

$ in

billi

ons

Net Assets

Fiscal Year-to-Year ComparisonsBWC’s total net assets have increased by $1.5 billion for fiscal year-to-date 2011 resulting in net assets of $5.3 billion at February 28, 2011 compared to $4.0 billion at February 28, 2010.

o BWC’s premium and assessment income for fiscal year-to-date 2011 is $1.3 billion compared to $1.4 billion for fiscal year-to-date 2010 reflecting decreased payroll and premium rates for private and state agency employers effective July 1, 2010 and January 1, 2010 and 2011 for public employer taxing districts.

o Benefit and compensation adjustment expenses increased by $60 million for fiscal year-to-date 2011 compared to prior fiscal year-to-date expenses.

o BWC’s net investment income for fiscal year-to-date 2011 totaled $1,877 million comprised primarily of $1,219 mil-lion in net unrealized gains and $206 million in net realized gains, along with $457 million of interest and dividend income, net of $5 million in investment expenses. This compares to last year’s fiscal year-to-date net investment income of $1,667 million.

o Declines in private employer and public employer taxing district premium rates have contributed to premium collections being $33 million less than prior fiscal year-to-date collections.

Conditions expected to affect financial position or results of operations include:

o Approximately 21,400 employers participating in the 50/50 payment plan will be paying $151 million in premiums by June 1, 2011 to maintain active coverage. These numbers are up from the 20,200 employers that participated last year that owed $146 million for the second installment.

o Coverage was lapsed March 1, 2011 for almost 38,000 private employers that failed to report payroll and pay pre-mium by the February 28th due date. As of March 11th, coverage remained in a lapsed status for over 29,000 private employers who owe an estimated $31.3 million in premiums. Estimated premium will be billed to employers that are still in a lapsed status the weekend of March 19th.

o Based upon the quarterly reserve analysis completed by Deloitte, reserves for compensation and compensation adjustment expenses will be reduced by approximately $14 million through February 28th. This reduction in esti-mated reserves is primarily a result of lower than expected benefit payments.

Total undiscounted reserves for compensation and compensation adjustment expense are $32.5 billion. See breakout by fund on page 13.

Change in Reserves $174 $47 $127Net Benefit Payments 1,140 1,181 (41)Payments for Comp Adjust Expenses 125 153 (28)MCO Admin Payments 113 111 2

$1,552 $1,492 $60

Fiscal YTD Fiscal YTD Increase($ in millions) Feb. 28, 2011 Feb. 28, 2010 (Decrease)

Operating Revenues $1,253 $1,261 $1,380Operating Expenses (1,629) (1,672) (1,549)Operating Transfers (5) (3) (3)Net Operating Gain (Loss) (381) (414) (172)Net Investment Income (Loss) 1,877 643 1,667Increase (Decrease) in Net Assets 1,496 229 1,495

Net Assets End of Period $5,321 $4,054 $4,010

Fiscal YTD Projected FYTD Fiscal YTD($ in millions) Feb. 28, 2011 Feb. 28, 2011 Feb. 28, 2010


Statement of OperationsFiscal year to date February 28, 2011

Operating Revenues

Premium & Assessment Income $1,291 $1,286 $5 $1,378 (87)

Ceded Premiums (4) (4) – – (4)

Provision for Uncollectibles (40) (27) (13) (4) (36)

Other Income 6 6 – 6 –

Total Operating Revenue 1,253 1,261 (8) 1,380 (127)

Operating Expenses

Benefits & Compensation Adj. Expense 1,552 1,585 33 1,492 60

Other Expenses 77 87 10 57 20

Total Operating Expenses 1,629 1,672 43 1,549 80

Operating Transfers (5) (3) (2) (3) (2)

Net Operating Gain (Loss) (381) (414) 33 (172) (209)

Net Investment Income (Loss) 1,877 643 1,234 1,667 210

Increase (Decrease) in Net Assets $1,496 $229 $1,267 $1,495 $1

Year to Year Variance to Prior Yr. Increase Actual Projected Projected Actual (Decrease)

(in millions)

$1,649 $1,510 $1,474 $1,380

$1,261 $1,253

$-

$500

$1,000

$1,500

$2,000

$2,500

FYTD 07 FYTD 08 FYTD 09 FYTD 10 FYTD 11 Projected

FYTD 11

mill

ions

Operating Revenues

$1,792

$2,267

$1,502 $1,549$1,672 $1,629

$0

$500

$1,000

$1,500

$2,000

$2,500


FYTD 11

mill

ions

Operating Expenses


Statement of Operations – Combining ScheduleFiscal year to date February 28, 2011

Operating Revenues:

Premium & Assessment Income $1,016,344 $56,418 $1,250 $288 $331 $17,985 $198,050 $1,290,666

Ceded Premiums (3,748) – – – – – – (3,748)

Provision for Uncollectibles (35,880) (261) (113) – (1) (369) (3,355) (39,979)

Other Income 3,903 – – – – – 2,210 6,113

Total Operating Revenues 980,619 56,157 1,137 288 330 17,616 196,905 1,253,052

Operating Expenses:

Benefits & Compensation Adj Expenses 1,344,699 51,672 702 43 20 17,050 137,356 1,551,542

Other Expenses 13,157 140 190 1 78 – 63,879 77,445

Total Operating Expenses 1,357,856 51,812 892 44 98 17,050 201,235 1,628,987

Net Operating Income (Loss) before Operating Transfers Out (377,237) 4,345 245 244 232 566 (4,330) (375,935)

Operating Transfers Out – – (4,425) – – – (425) (4,850)

Net Operating Income (Loss) (377,237) 4,345 (4,180) 244 232 566 (4,755) (380,785)

Investment Income:

Investment Income 426,930 20,721 4,588 334 250 25 3,626 456,474

Net Realized Gains (Losses) 89,769 94,608 22,039 – – – – 206,416

Net Unrealized Gains (Losses) 1,223,843 1,508 (7,013) 65 49 – – 1,218,452

Total Realized & Unrealized Capital Gains (Losses) 1,313,612 96,116 15,026 65 49 – – 1,424,868

Investment Manager & Operational Fees (4,639) (143) (31) (6) (5) – – (4,824)

Gain (Loss) on Disposal of Fixed Assets – – – – – – (20) (20)

Total Non–Operating Revenues, Net 1,735,903 116,694 19,583 393 294 25 3,606 1,876,498

Increase (Decrease) in Net Assets (Deficit) 1,358,666 121,039 15,403 637 526 591 (1,149) 1,495,713

Net Assets (Deficit), Beginning of Period 3,305,546 1,044,635 193,297 22,568 16,398 7,025 (764,390) 3,825,079

Net Assets (Deficit), End of Period $4,664,212 $1,165,674 $208,700 $23,205 $16,924 $7,616 $(765,539) $5,320,792

This report shows operating activity for each of the funds administered by BWC.

The deficit in net assets for the Administrative Cost Fund is a result of recognizing the actuarially estimated liabilities for loss adjustment expenses while funding for ACF is on a pay–as–you–go basis.

Disabled Coal–Workers Public Work Marine Self–Insuring Administrative State Insurance Workers’ Relief Pneumoconiosis Relief Employees’ Industry Employers’ Guaranty Cost Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account Totals

(in thousands)


Investment Income

Bond Interest $399,738 $441,940 $(42,202) $415,105 $(15,367)

Dividend Income–Domestic & International 55,967 59,330 (3,363) 55,107 860

Money Market/Commercial Paper Income 202 1,048 (846) 993 (791)

Misc. Income (Corp Actions, Settlements) 567 3,200 (2,633) 2,448 (1,881)

Total Investment Income 456,474 505,518 (49,044) 473,653 (17,179)

Realized & Unrealized Capital Gains and (Losses)

Bonds – Net Realized Gains (Losses) 160,976 – 160,976 41,340 119,636

Stocks – Net Realized Gains (Losses) 51,884 – 51,884 (585,951) 637,835

Non –U.S. Equities – Net Realized Gains (Losses) (6,444) – (6,444) (21,381) 14,937

Subtotal – Net Realized Gains (Losses) 206,416 – 206,416 (565,992) 772,408

Bonds – Net Unrealized Gains (Losses) (291,551) – (291,551) 460,611 (752,162)

Stocks – Net Unrealized Gains (Losses) 1,033,897 142,740 891,157 1,300,656 (266,759)

Non –U.S. Equities – Net Unrealized Gains (Losses) 476,106 – 476,106 2,640 473,466

Subtotal – Net Unrealized Gains (Losses) 1,218,452 142,740 1,075,712 1,763,907 (545,455)

Change in Portfolio Value 1,424,868 142,740 1,282,128 1,197,915 226,953

Investment Manager & Operational Fees (4,824) (5,074) 250 (4,368) 456

Net Investment Income (Loss) $1,876,518 $643,184 $1,233,334 $1,667,200 $209,318

Statement of Investment IncomeFiscal year to date February 28, 2011

Year to Year Variance to Prior Yr. Increase Actual Projected Projected Actual (Decrease)

(in thousands)

$1,036 $985

$(1,532)

$1,667

$643

$1,877

$(2,000)

$(1,500)

$(1,000)

$(500)

$-

$500

$1,000

$1,500

$2,000


FYTD 11

mill

ions

Net Investment Income (Loss)


Administrative Cost Fund Expense AnalysisFebruary 2011

o BWC Administrative Cost Fund expenses through fiscal year to date (FYTD) February 2011 are approxi-mately $11.7 million (6.7%) less than budgeted and 2% less than last fiscal year to date.

o Decreases in payroll through FYTD February 2011 are a result of decreases in staffing due to retirements and hiring controls. As of February 2011, there were approximately 170 less full time equivalent positions compared to the same time last year. Payroll changes within the Fiscal and Planning and Information Tech-nology divisions are the result of Office Services and Facilities departments moving between divisions. Through February 2011 journal entries, BWC staff have taken 148,700 (88%) of the available 169,000 hours of cost savings days for a savings of approximately $4.4 million, which is about the same as last fiscal year.

o The timing of the receipt of invoices for payment in fiscal year 2011 contributed to actual expenditures being less than the amount budgeted through February. Purchase orders have been completed in the Personal Services and Maintenance categories to encumber the FYTD 2011 budgeted amounts. Excess postage available from the previous fiscal year resulted in a significant reduction in the amount of postage purchased in FY 2011. This caused Communication expenses to be less than budgeted FYTD. A delay in FY11 projects resulted in FYTD actual Equipment costs being less than budgeted and less than the previ-ous fiscal year. Special Counsel expenditures were greater for FYTD 2011 than FYTD 2010 due to timing of invoice payments and additional contract hours for Special Counsel services. Changes to the Safety Grant Program in fiscal year 2010 caused a reduction in activity for that fiscal year.

o The use of cost savings days, identification of additional costs savings and reevaluation of approved proj-ects resulted in a $21 million reduction in the fiscal year 2011 budget.

o BWC’s current fiscal year 2011 budget is approximately $65 million (19.8%) less than appropriated by the General Assembly.


Administrative Cost Fund Budget SummaryAs of February 28, 2011

Payroll

BWC Board of Directors 12 503,381 503,381 0 0.00% 806,362 573,213 (69,832) -12.18%

BWC Administration 13 957,038 957,274 236 0.02% 1,385,728 945,929 11,109 1.17%

Customer Service 1,319 70,528,675 70,511,709 (16,966) -0.02% 101,500,574 73,190,364 (2,661,689) -3.64%

Medical 116 6,669,905 6,669,905 0 0.00% 9,666,940 7,486,814 (816,909) -10.91%

Special Investigations 117 7,025,486 7,023,272 (2,214) -0.03% 10,109,311 7,101,276 (75,790) -1.07%

Fiscal and Planning 102 5,056,561 5,047,103 (9,458) -0.19% 7,386,661 3,418,008 1,638,553 47.94%

Actuarial 21 1,315,363 1,315,820 457 0.03% 1,952,138 1,421,317 (105,954) -7.45%

Investments 10 815,703 815,703 0 0.00% 1,196,873 856,720 (41,017) -4.79%

Information Technology 229 16,895,932 16,934,219 38,287 0.23% 24,800,979 19,423,434 (2,527,502) -13.01%

Legal 76 4,644,290 4,644,637 347 0.01% 6,880,619 4,593,016 51,274 1.12%

Communications 16 985,992 986,292 300 0.03% 1,372,777 1,108,394 (122,402) -11.04%

Human Resources 64 3,458,541 3,458,308 (233) -0.01% 5,107,085 3,419,105 39,436 1.15%

Internal Audit 13 837,082 836,974 (108) -0.01% 1,226,629 882,549 (45,467) -5.15%

Ombuds Office 7 355,791 355,791 0 0.00% 517,757 354,646 1,145 0.32%

Total Payroll 2,115 120,049,740 120,060,388 10,648 0.01% 173,910,433 124,774,785 (4,725,045) -3.79%

Personal Services

Information Technology 3,556,873 5,153,946 1,597,073 30.99% 8,036,531 3,882,486 (325,613) -8.39%

Legal - Special Counsel 673,979 707,712 33,733 4.77% 1,060,032 404,798 269,181 66.50%

Legal - Attorney General 3,629,276 3,466,387 (162,889) -4.70% 4,621,850 3,126,992 502,284 16.06%

Other Personal Services 3,926,613 5,554,739 1,628,126 29.31% 7,442,144 3,804,313 122,300 3.21%

Total Personal Services 11,786,741 14,882,784 3,096,043 20.80% 21,160,557 11,218,589 568,152 5.06%

Maintenance

William Green Rent 1,552,110 1,554,697 2,587 0.17% 19,049,395 1,930,362 (378,252) -19.59%

Other Rent and Leases 7,111,767 7,540,866 429,099 5.69% 9,607,149 7,454,541 (342,774) -4.60%

Software and Equipment Maintenance and Repairs 9,965,717 11,477,402 1,511,685 13.17% 14,625,922 8,921,790 1,043,927 11.70%

Inter Agency Payments 3,304,715 3,085,469 (219,246) -7.11% 4,740,593 3,124,728 179,987 5.76%

Communications 1,812,230 2,860,943 1,048,713 36.66% 4,067,824 1,767,765 44,465 2.52%

Safety Grants and Long Term Care Loan 2,164,672 2,995,000 830,328 27.72% 4,000,000 940,751 1,223,921 130.10%

Supplies and Printing 697,065 950,114 253,049 26.63% 1,417,848 627,679 69,386 11.05%

Other Maintenance 1,773,748 2,314,362 540,614 23.36% 3,513,404 2,035,784 (262,036) -12.87%

Total Maintenance 28,382,024 32,778,853 4,396,829 13.41% 61,022,135 26,803,400 1,578,624 5.89%

Equipment 1,102,087 5,300,713 4,198,626 79.21% 7,256,424 1,857,426 (755,339) -40.67%

Total Administrative Cost Fund Expenses 161,320,592 173,022,738 11,702,146 6.76% 263,349,549 164,654,200 (3,333,608) -2.02%

FYTD11 FYTD11 Increase Percentage FTE’s Actual Budgeted FYTD11 Percentage FY11 FYTD10 (Decrease) Increase FY11 FYTD11 Variance Variance Budget Expenses in FY11 (Decrease)

Total Agency Appropriation 328,602,765Budget to Appropriation Variance 65,253,216Percentage Variance 19.86%

Expense Description


State Insurance Fund Administrative Expense Summary

As of February 28, 2011

Investment Administrative Expenses

JP Morgan Chase - Performance Reporting $63,250 $39,418 $102,668 $56,167

Mercer Investment Consulting 326,667 251,914 578,581 325,416

Other Investment Expenses 264,136 146,913 411,049 286,461

654,053 438,245 1,092,298 668,044

Actuarial Expenses

Oliver Wyman - Actuarial Services 0 0 0 583,051

Deloitte Consulting - Actuarial Services 1,046,785 1,308,067 2,354,852 670,257

1,046,785 1,308,067 2,354,852 1,253,308

Reinsurance Expenses

Towers Watson 4,578,357 0 4,578,357 0

Ohio Rehabilitation Services 605,407 0 605,407 605,407

TOTAL $6,884,602 $1,746,312 $8,630,914 $2,526,759

Actual Encumbrance FYTD Actual Actual FYTD 2011 Balance & Encumbrance FYTD 2010

The above expenses are paid from the non–appropriated State Insurance Fund.

The investment administrative expense are included in the investment expenses reported on the statement of investment income on page 7.

The encumbrance balance is the amount remaining on the contract and may extend beyond the end of this fiscal year.

Operating TransfersAs of February 28, 2011

Workers’ Compensation Council $ – $ 325,000 Administrative Cost Fund

Ohio Dept. of Natural Resources

Mine Safety Fund 2,145,000 1,891,575 Coal Workers’ Pneumoconiosis Fund

Strip Mining Admin Fund 2,280,000 – Coal Workers’ Pneumoconiosis Fund

Ohio Inspector General 425,000 425,000 Administrative Cost Fund

TOTAL $ 4,850,000 $2,641,575

FYTD 2011 FYTD 2010 Source


Statement of Cash FlowsFiscal year to date February 28, 2011

Cash Flows from Operating Activities:

Cash Receipts from Premiums, Net of Reinsurance $1,566 $1,479 $87 $1,599 $(33)

Cash Receipts – Other 24 21 3 40 (16)

Cash Disbursements for Claims (1,315) (1,377) 62 (1,351) 36

Cash Disbursements for Other (252) (283) 31 (272) 20

Net Cash Provided (Used) by Operating Activities 23 (160) 183 16 7

Net Cash Flows from Noncapital Financing Activities (5) (3) (2) (3) (2)

Net Cash Flows from Capital and Related Financing Activities (4) (2) (2) (4) –

Net Cash Provided (Used) by Investing Activities 188 61 127 745 (557)

Net Increase (Decrease) in Cash and Cash Equivalents 202 (104) 306 754 (552)

Cash and Cash Equivalents, Beginning of Period 436 436 – 504 (68)

Cash and Cash Equivalents, End of Period $638 $332 $306 $1,258 $(620)

(in millions) Year to Year Variance to Prior Yr. Increase Actual Projected Projected Actual (Decrease)

$460

$163 $87

$291

$58

$157

$471

$69 $30

$120 $47

$171

$501

$-

$100

$200

$300

$400

$500

$600

Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sept-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11

$ in

mill

ions

Premium and Assessment Receipts


Assets

Bonds $13,501 $12,687 $814

U.S. Equities 4,623 3,867 756

Non-U.S. Equities 2,126 1,615 511

Cash & Cash Equivalents 638 1,258 (620)

Total Cash and Investments 20,888 19,427 1,461

Accrued Premiums 4,361 4,396 (35)

Other Accounts Receivable 206 193 13

Investment Receivables 223 3,457 (3,234)

Other Assets 99 102 (3)

Total Assets 25,777 27,575 (1,798)

Liabilities

Reserve for Compensation and Compensation Adj. Expense $19,979 $19,294 $685

Accounts Payable 99 79 20

Investment Payable 196 4,004 (3,808)

Other Liabilities 182 188 (6)

Total Liabilities 20,456 23,565 (3,109)

Net Assets $5,321 $4,010 $1,311

Statement of Net AssetsAs of February 28, 2011

(in millions) Year to Year Prior Yr. Increase Actual Actual (Decrease)

Total undiscounted reserves for compensation and compensation adjustment expense are $32.5 billion. See breakout by fund on page 13.

$2.3 $2.5 $2.5

$3.8

$5.3

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

FY End 2007 FY End 2008 FY End 2009 FY End 2010 FYTD 2011

$ in

Bill

ions

Net Assets


Statement of Net Assets – Combining ScheduleAs of February 28, 2011

Assets

Bonds $ 12,337,541 $ 900,366 $ 218,916 $ 25,419 $ 19,165 $ – $ – $ – $ 13,501,407

U.S. Equities 4,280,367 302,688 39,960 – – – – – 4,623,015

Non–U.S. Equities 1,953,456 149,816 22,683 – – – – – 2,125,955

Private Equities 35 – – – – – – – 35

Cash & Cash Equivalents 589,257 1,504 297 200 206 44,817 1,648 – 637,929

Total Cash & Investments 19,160,656 1,354,374 281,856 25,619 19,371 44,817 1,648 – 20,888,341

Accrued Premiums 1,552,683 1,772,420 – 462 – 854,336 181,395 – 4,361,296

Other Accounts Receivable 135,999 21,060 47 – 1 3,256 44,979 – 205,342

Interfund Receivables 11,508 57,655 12 – 34 8,643 149,720 (227,572) –

Investment Receivables 223,368 – – – – 1 – – 223,369

Other Assets 25,367 22 – – – – 72,940 – 98,329

Total Assets $ 21,109,581 $ 3,205,531 $ 281,915 $ 26,081 $ 19,406 $ 911,053 $ 450,682 $ (227,572) $ 25,776,677

Liabilities

* Reserve for Compensation & Compensation Adj. Expense $ 15,845,936 $ 2,029,536 $ 72,400 $ 2,836 $ 2,336 $ 901,764 $ 1,123,736 $ – 19,978,544

Accounts Payable $ 97,689 – – – – – 1,015 – 98,704

Investment Payable 196,476 – – – – – – – 196,476

Interfund Payables 215,468 10,262 105 35 29 1,673 – (227,572) –

Other Liabilities 89,800 59 710 5 117 – 91,470 – 182,161

Total Liabilities 16,445,369 2,039,857 73,215 2,876 2,482 903,437 1,216,221 (227,572) 20,455,885

Net Assets $ 4,664,212 $ 1,165,674 $ 208,700 $ 23,205 $ 16,924 $ 7,616 $ (765,539) $ – $ 5,320,792

Disabled Coal–Workers Public Work Marine Self–Insuring Administrative State Insurance Workers’ Relief Pneumoconiosis Relief Employees’ Industry Employers’ Guaranty Cost Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account Eliminations Totals

(in thousands)

*The undiscounted reserves for compensation and compensation adjustment expenses are as follows:

(in thousands)

SIF $25,020,100

DWRF 3,494,733

CWPF 181,867

PWRE 4,600

MIF 3,533

SIEGF 1,966,967

ACF 1,802,000

Total $32,473,800


1.14 1.15 1.151.22

1.31

0.75

1.00

1.25

1.50

Fiscal Year End 2007




FYTD 2011

Min 1.15 Max 1.35Guidelines

8.26 7.93 7.89

5.17

3.61

0.00

5.00

10.00

15.00





FYTD 2011

Min 3.0 Max 7.0Guidelines

Net Leverage Ratio

Funding Ratio (State Insurance Fund) 1.31 1.24 1.25 1.15 to 1.35

Net Leverage Ratio (SIF) 3.61 4.80 4.64 3.0 to 7.0

Loss Ratio 100.1% 102.3% 88.9%

LAE Ratio - MCO 9.5% 9.2% 8.1%

LAE Ratio - BWC 10.6% 11.7% 11.3%

Net Loss Ratio 120.2% 123.2% 108.3% 102.5%

Expense Ratio 6.0% 6.8% 4.2% 7.5%

Combined Ratio 126.2% 130.0% 112.5% 110.0%

Net Investment Income Ratio 35.0% 38.9% 34.1%

Operating Ratio (Trade Ratio) 91.2% 91.1% 78.4% 90.0%

Financial Performance Metrics

Actual Projected Actual FY11 FY11 FY10 Guidelines As of 2/28/11 As of 2/28/11 As of 2/28/10

Guidelines represent long–term goals for the agency. Business practices, peer group results, and historical data were consid-ered in the establishment of the guidelines.

Funding RatioProvides an indication of financial strength and security – Funded assets divided by funded liabilities.

Net Leverage RatioMeasures the combination of BWC’s exposure to pricing errors and errors in estimating its liabilities in relation to net assets. Premium income plus reserves for compensation and compensation adjust-ment expense divided by net assets.

Loss RatioMeasures loss experience – Compensation benefit expenses di-vided by premium and assessment income.

LAE RatioMeasures loss adjustment experience – Loss adjustment expenses divided by premium and assessment income.

Net Loss RatioMeasures underlying profitability or total loss experience – Sum of the loss and LAE ratios.

Expense RatioMeasures operational efficiency – Other administrative expenses divided by premium and assessment income.

Combined RatioMeasures overall underwriting profitability – Sum of net loss and expense ratios.

Net Investment Income RatioMeasures the investment income component of profitability – In-terest and dividend income less investment expenses divided by premium and assessment income. This ratio does not include real-ized or unrealized capital gains and losses.

Operating RatioMeasures overall profitability from underwriting and investing ac-tivities – Combined ratio less net investment income ratio.

Funding Ratio Net Leverage Ratio


New Claims Filed - Twelve months ended

New Claims Filed measures the number of new State Insurance Fund claims filed in rolling twelve month periods measured quarterly. A steady downward trend was in place from the twelve months ended March 31, 2007 through the twelve months ended December 31, 2009 (from 177,107 new claims to 120,279 new claims). The trend has been relatively flat over the past four quarters with 120,015 new claims filed in the twelve months ended December 31, 2010.

Claim Filing Lag - Reported quarterly

Claim Filing Lag measures the average and median number of days from the date of injury to the date of claim filing. Average claim filing lag has varied from 16.19 days to 21.16 days from the quarter ended March 31, 2007 through the quarter ended December 31, 2010. The median claim filing lag has varied between three and four days over the same time period. Numbers of new claims filed per quarter are also provided and peaked at 44,656 in the quarter ended September 30, 2007, trended down to a low of 27,173 in the quarter ended December 31, 2009 and were at 28,235 in the quarter ended December 31, 2010.

Operational Performance Metrics


Benefit Payments - Twelve months ended

Benefit Payments measures the dollar amount of medical and indemnity payments for rolling twelve month periods updated quarterly. Indemnity payments include settlements and peaked at $1.230 billion in the twelve months ended March 31, 2008 and have trended down to $1.071 billion in the twelve months ended December 31, 2010. Medical pay-ments peaked at $863 million in the twelve months ended December 31, 2008 and have decreased to $781 million in the twelve months ended December 31, 2010.

Frequency - Reported semi-annually

Frequency measures the number of injuries reported per 100 workers covered by the State Insurance Fund updated semi-annually. The US Bureau of Labor Statistics figure decreased from 5.3 injuries per 100 workers in 2002 to 3.6 in-juries per 100 workers in 2009. The BWC figure decreased from 6.52 injuries per 100 workers in December 2002 to 3.68 injuries per 100 workers as of December 2009 and June 2010. Numbers of employees for BWC statistics are calculated by dividing reported payroll by the statewide average weekly wage.


Severity - Cumulative from date of injury through end of reporting quarter

Severity measures the average cost of medical and indemnity expenses per active lost time claim. Indemnity amounts exclude settlements. BWC changed the definition of active claims in October 2010 from claims receiving payment or filing an application for benefits within thirteen months to twenty-four months. This change in definition increased the number of active claims by over 40%. Prior quarters have been re-stated to present an accurate quarter to quarter comparison. Average medical expenses per active lost time claim have increased from $23,917 as of March 31, 2007 to $34,118 as of December 31, 2010. Average indemnity expenses per active lost time claim have increased from $37,329 to $51,901 over the same period. Medical expenses on Medical Only claims (not reflected in chart) have increased from $949 to $1,139 during this period.

Return to Work - Reported quarterly

Return to Work (RTW) measures the percentage of injured workers with active claims who have returned to work relative to the claim population that has received temporary income replacement benefits. Prior quarters have been re-stated to present an accurate quarter to quarter comparison based on the new definition of active claims. The total number of active claims receiving temporary income replacement benefits has dropped from 121,409 as of March 31, 2007 to 94,234 as of December 31, 2010. The RTW rate has dropped from 75.2% to 69.7% over the same period.


Premium Stability

Premium Stability measures the number of employers whose premium rate changed more than five percent and total premium changed more than $500 from the previous year broken down into the number of employers that ex-perienced increases versus decreases. Employers with significant payroll changes (> $10,000, at least 20% of first or second year payroll and > $500 premium change) are excluded. December 2009 was the first payroll period since June 2006 where the percentage of employers with unstable rate decreases exceeded those with unstable rate increases. This trend continued in June 2010.

($ in millions) Private PEC PES Black Lung Marine

Dec 2002 $82,400 $17,611 $5,823 $64 $3

Jun 2003 $83,090 $17,611 $5,924 $51 $4

Dec 2003 $83,304 $18,022 $6,005 $59 $4

Jun 2004 $83,741 $18,022 $6,076 $73 $3

Dec 2004 $85,492 $18,545 $6,184 $84 $3

Jun 2005 $86,530 $18,545 $6,266 $82 $4

Dec 2005 $87,902 $18,594 $6,388 $87 $4

Jun 2006 $90,414 $18,594 $6,524 $98 $5

Dec 2006 $91,830 $18,946 $6,654 $98 $5

Jun 2007 $93,636 $18,946 $6,788 $100 $4

Dec 2007 $94,890 $19,427 $6,914 $107 $4

Jun 2008 $95,027 $19,427 $7,032 $117 $5

Dec 2008 $94,580 $19,778 $7,065 $134 $5

Jun 2009 $91,066 $19,778 $7,194 $150 $5

Dec 2009 $87,696 $19,753 $7,384 $139 $4

Jun 2010 $86,408 $19,753 $7,161 $153 $4

Aggregate Reported Payroll- Twelve months ended

Aggregate Reported Payroll measures reported payroll by employer type for a rolling twelve month period, updated semi-annually. PEC employers report payroll only once per year, while other employers report twice per year. There-fore, the same PEC payroll is presented twice in each fiscal year. The bulk of payroll is reported by Private employers which rose steadily from December 2002 through June 2008 but has decreased over the past four reporting periods.

Legislative Affairs Update for BWC Board of Directors March 2011

HB 123- (Hottinger) - BWC Budget for fiscal years 2012 and 2013.

- For fiscal years 2010 and 2011, BWC’s combined appropriation was $657.6 million. Comparatively, the

proposed budget for fiscal years 2012 and 2013 is $578.9 million; this reflects a reduction of nearly 12

percent in overall expenditures.

- In addition to our appropriations, there are several statutory changes in the bill. However, none of these

changes directly affect benefit levels for injured workers. They also will not have a premium impact on

employers. Instead, these changes are meant to clarify ambiguous language or simplify interactions with

our customers. Some of the statutory changes are:

o Permit payment to providers who provided services before a claim is overturned by an

employer’s appeal on a claim.

o Reduce the time limit for submitting medical bills from two years to one year.

o Clarify the discrepancy and account for the funding of claims costs for rehab claims of state

agency- or state university-employees.

o Waive some of the requirements our cities and counties currently face when applying for self

insurance.

- Passed out of the House of Representatives on 3.23.11 with a vote of 95-0

- Moves to the Ohio Senate for consideration

HB 93 – (Burke) - To establish and modify the prevention of prescription drug abuse, development of

information programs by the State Medical Board, and Medicaid coverage of prescription drugs. - Includes the provision applicable to BWC: Not later than July 1, 2012, the administrator of workers'

compensation shall adopt rules in accordance with Chapter 119. of the Revised Code to implement a

coordinated services program for claimants under this chapter or Chapter 4123., 4127., or 4131. of the

Revised Code who are found to have obtained prescription drugs that were reimbursed pursuant to an

order of the administrator or of the industrial commission or by a self-insuring employer but were

obtained at a frequency or in an amount that is not medically necessary. The program shall be

implemented in a manner that is substantially similar to the coordinated services programs established

for the Medicaid program under section 5111.085 and 5111.179 of the Revised Code.

- Passed out of the House of Representatives 3.9.11

- Received first hearing in the Senate Health, Human Services and Aging Committee 3.23.11.

HB 137- (Phillips, Driehaus) - SB 107 (Skindell)- Uniform definition of employee

- To create a generally uniform definition of employee for specified labor laws and to create a uniform

standard to determine whether an individual performing services for an employer is an employee of that

employer.

- HB 137 was introduced on 3.2.11 and is pending in the House Commerce and Labor Committee

- SB 107 was introduced on 3.2.11 and is pending in the Senate Insurance Committee

- Neither bill is scheduled for consideration

BWC Board of Directors...3/11/2011 11:24 AM BWC Board of Directors Board Agenda Thursday, March 24,...

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